During a busy week for talkRA, Subex slipped out their dreadful annual results. The full and detailed analysis will have to wait until next week, but the chief conclusion does not require much analysis. The headline news is that Subex generated a pathetic USD61mn of sales in FY13, down 31% on FY12. To put this into further context, Subex was generating USD120mn in annual revenues at their peak, and I still thought they should be orbiting in roughly in the USD90mn-USD100mn band as recently as a year ago. Given that rivals WeDo announced annual sales were USD71mn, up 20% year-on-year, the natural inference is that Subex’s problems are internal rather than external. The stock market seems to agree. Whatever good news rumours perked up the share price on Monday 20th May, those buyers of Subex’s shares found they had wasted their money, with the share price soon tumbling by nearly a quarter to new all-time lows.

The response of Subex’s management to this terrible news inspires less confidence than a man trying to put a sticky plaster over the hole in the Titanic’s hull. Subex CEO Surjeet Singh said:

We have successfully maintained our market leadership in Revenue Assurance and Fraud Management accordingly to leading analyst firm Gartner for the third year in a row.

That sounds like boasting how high you are, having jumped off the deck of the Titanic, plunging toward the deep and icy cold water below, blissfully unaware of the grand piano which is also falling towards the sea, just a few feet above your head. Also, it involves taking comfort from a Gartner report. This would be like paying Gartner to write a report saying I am sexier than David Beckham, George Clooney and Robert Pattinson combined, just so I can include a copy of the report inside a Valentine’s card. It may be promotional, but like Subex’s rusty old product suite, nobody is going to buy it.

Not satisfied with mentioning Gartner as cover for their awful results, Subex issued a second press release a few days later, reiterating the nonsense that they were market leaders. In that release, Vinod Kumar, COO, said:

We are extremely pleased with this validation of our leadership position in the Revenue Assurance and Fraud Management space for the third year in a row. Our perseverance and commitment, to enable telecom service providers build competitive advantage in this volatile marketplace, has firmly helped us consolidate our leadership position. We aim to continue to grow faster, strengthen our key solutions with our Managed Services offering and expand our global footprint…

Whoever does Subex’s PR needs to be fired for such counter-productive twaddle. For a start, WeDo’s USD71mn is more than Subex’s USD61mn, even before anyone argues that Subex’s contract with BT generates a lot of revenue which should not be classified as either revenue assurance or fraud management. Second, the company had a bad year and the figures went into a sharp reverse. Management palaver about perseverance (persevering with a failing business model?), consolidating a leadership position (a 31% fall in sales is not consolidation), and growing faster (what growth does he think he is talking about?), only makes Subex’s management team sound like a bunch of nincompoops who are divorced from reality. Even the supposed volatility of the marketplace could hardly explain why Subex’s sales are the lowest they have been since the acquisition of Azure in 2006.

Six months ago, I wrote that Subex’s management need to communicate a strategy to turn around their business. Since then, we have heard nothing. The conclusion is that this team have seen their ship hit the iceberg, and have no idea what to do about it. Perhaps they are hoping for the share price to finally sink so low that a buyer will swoop in and haul them back to dry land. However, there is a big difference between the scrap value of the Titanic when still afloat, and when she hits rock bottom. This management team keep waltzing around the Titanic’s ballroom, but somebody needs to change the tune.

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5 Responses to “Subex Dives; No management turnaround”

  1. Dan Baker says:

    Eric,

    These are hard times for many business assurance players. WeDo’s revenues have grown, but I wonder business is coming from their sister division Optimus and their new retail industry customers such as BestBuy. In this lousy economic climate, cVidya has no doubt also struggled to bolster RA business as it expands into financial and pricing analytics.

    I haven’t spoken to Subex about its overall business in a year, but I believe their wholesale billing biz is solid and their network asset management play is intriguing.

    In baseball, when a relief pitcher comes in, any runs scored by runners already on base don’t count against the relief pitcher’s Earned Run Average, At Subex, it’s the starting pitcher who’s responsible for the last 12 months of results. Now it’s up to the new team to step up and smack a few balls out of the park.

    Opportunity is still out there to leverage CDRs, mathematics, and dashboards, but the field of battle has changed. I’m now embroiled in a deep study of the telecom analytics market where at least 20 software companies are active on the customer/marketing analytics side. Even many of the established RA/FM are looking at customer/marketing analytics as a key area of expansion.

    These days it may be easier to sell solutions to the CMO than the CFO. And it certainly always helps when the solution you offer is more turnkey and require less handholding from IT or network operations.

    I’m enjoying my exploration of the telecom analytics market. And come September, I should have some interesting qualitative and quantitative research to base my opinions on.

  2. Eric says:

    @ Dan, I don’t get to see audited numbers for WeDo like those for Subex, but WeDo’s CFO did say that Portuguese revenues were a declining share of their total revenues. He also said roughly half of their growth came from acquiring Connectiv, which leads me to think that revenues from within Sonae’s group are probably no more than stable year-on-year.

    You’re right to say network asset management is a good play for Subex. I’m more troubled that Subex have had this in their locker for a while, and aren’t reporting more exciting growth for the product.

    I couldn’t agree more about pitching to the CMO instead of the CFO. Some telcos need to get their sales mojo back, and analytics might help the CMO to hit some balls out of the park.

  3. Joseph Nderitu says:

    It seems the writing has been on the wall for so long that somebody would have to demolish the wall for Subex to notice something is amiss. I had to scan through the listing of Board of Directors (http://www.subex.com/board-of-directors.php) to understand the kindness of a board that allows management to keep on this flashy PR while running the ship aground. Of course, I had to chuckle when I read Eric’s statement:

    “However, there is a big difference between the scrap value of the Titanic when still afloat, and when she hits rock bottom.”

    I will definitely use that phrase on somebody soon :)

  4. Fernando Videira says:

    Hi Dan,
    I haven’t had the pleasure of meeting you, but I’m more than happy to answer any question and clear any doubt that you may have regarding WeDo Technologies figures and annual accounts, in the same way I answered all the questions Eric posed to me and to our CMO.
    Thanks,
    Fernando Videira

  5. Dan Baker says:

    Thanks, Fernando. I will contact this summer when the draft of the WeDo vendor profile for our telecom analytics reseach study is ready. In the meantime, enjoy the lovely beaches of your country.

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